CYPRUS IP BOX REGIME

Do you Own Intellectual Property?

If your answer is yes, you should take advantage of the Cyprus IP Box Regime to boost your profits and substantially reduce your IP taxes, and here’s why.

It’s a well-known fact that Cyprus offers IP owners one of the most advantageous tax environments in the world.

That’s because on 1 January 2012, Cyprus introduced new incentives and exemptions relating to intellectual property tax planning. These new rules, collectively known as a "Patent box" or "IP Box", offer an 80% tax exemption for revenue earned from the use of qualifying intangible assets, such as intellectual property. This translates to a tax rate of 2.5% on income earned from IP assets.

No other European country comes close to that rate. The next-best rates available are Belgium at 3.75%, Hungary at 4.5% and Luxembourg at 5.2%, Netherlands at 7% and France and the UK at 10%.

Moreover, the Cyprus IP Box regime applies to more types of income than similar schemes. Most other European locations restrict the tax benefits to income from patents and supplementary patent certificates.

So, if you own intellectual property and want to reduce the IP tax you pay on income received from your IP, then you certainly cannot ignore the benefits Cyprus has to offer.

Here's what the Cyprus IPt Box offers intellectual property (IP) owners:

Cyprus and technology

Cyprus is intent on becoming a leading Regional Research Centre in the fields of science and technology. An agreement has been signed with the Harvard School of Public Health to help establish the Cyprus International Institute of the Environment and Public Health.

Tech hubs and technology parks are flourishing on the island, as well as a Research and Educational Foundation has been established — a purpose-built technology park that provides an ideal environment for Research & Development activities, newly-formed IT businesses and university research departments.

Technology Companies in Cyprus

Tech companies from all over the world have already discovered the amazing tax planning opportunities that Cyprus provides. Hundreds of software and technology companies are now calling Cyprus home such as Viber, Wargaming, Amdocs, 3CX and JetBrains to name a few, having established either their headquarter, back office, or development centre for launching their start up or expanding their business. Cyprus is clearly being transformed into a hotspot for IT and software development companies.

A stable, secure and well–placed business environment

The Cyprus IP Box is probably the best IP regime currently available. It is ideal because Cyprus has an established and open free-market economy with an excellent communications network. You’ll also have the advantage of an adaptable, multilingual and highly educated workforce. In fact, so comprehensive is the island's professional services sector, that it has become known as a center of excellence for legal, accounting and tax planning services.

And that’s not all.

Cyprus is one of the most business-friendly countries globally. It ranks 54 among 190 countries listed by the World Bank for their ease of doing business. The island nation has strong and stable political and fiscal systems. This includes the usual EU benefits of numerous trade agreements, double-taxation treaties, and visa-free travel.

In terms of location, Cyprus also provides the perfect gateway for IP owners wishing to serve the major markets of Europe, North Africa, Russia, Central Asia and the Middle East, making it one of the best locations for some wonderful, intellectual property tax planning opportunities.

Ready to find out how you can benefit from the Cyprus IP Box?  Get in touch with us today!

Why the Cyprus IP Box Regime?

Here’s why the Cyprus IP Box Regime is a sound idea.

It offers an 80% tax exemption for revenue earned from the use of qualifying intangible assets, such as patentable IP and software. That, combined with its compliance with EU, OECD and WIPO standards, a Cyprus IP box will offer you access to a wide range of international IP rights and taxation treaties, allowing you to enjoy the many benefits of a Cyprus-resident company.

More benefits of a Cyprus IP Box regime are:

Reduced Taxation on Intellectual Property (IP)

• You’ll enjoy an 80% tax exemption because four-fifths of your profit or income from IP use is exempt from taxation.
• You’ll benefit from a low corporate tax rate on the remaining 20% of your profit or income which is subject to Cyprus's competitive 12.5% corporate tax rate, resulting in an overall effective tax rate of just 2.5%. This rate can be further reduced by applying available deductions.
• All expenses related to generating royalty income are tax-deductible.
• Because Cyprus has double taxation treaties with over 40 countries and access to the EU Interest and Royalty Directive, your IP will benefit from rights in a vast global network.

IP Protection and Amortization

• Because Cyprus offers a robust legal system based on English law, you can be sure that your IP interests are well-protected.
• You can reduce your tax burden by amortizing your IP acquisition or development costs over a straight-line basis over five years.
• With an additional 20% writing down allowance, your IP's value can be written down annually, further reducing your tax burden

Tax-Advantaged Exit Strategy

• Upon exit, by selling your IP management company's shares instead of the IP itself, you can potentially achieve exemption from taxes on the sale proceeds and avoid stamp duty on the transaction.

Let’s Look at an IP Tax Example

And an example of Taxation on Disposal:

Ready to start benefiting from low taxes? Open an IP management company in Cyprus today!

Criteria to meet to qualify for the Cyprus IP Box Regime

The IP Regime Box is available to any Cyprus tax resident company, that owns IP assets which are patentable under a patent or are computer software, provided the Cyprus Company, meets the following three criteria:

• The Cyprus Company is economic owner of the specific software either by acquiring the same from the existing owner or developing the software from scratch.
• There is development of the software either via employees of the company or agreements with third party developers.
• The software is licensed to a third party / parties and the company receives royalties.

Ready to benefit from the Cyprus IP Box?  Schedule a free consultation today.

How Meridian Trust can help

Meridian Trust will guide you through every step of the way and help you maximize the advantages of the Cyprus IP Box regime. Our team will guide you from company setup to ongoing IP protection and ensure you enjoy the benefits of this tax-efficient structure.

Here's how we can help:

• We will help you establish a Cyprus-resident company that will wholly be owned by your IP's owners, eliminating the need for physical visits since everything can be done remotely.
• We will then securely transfer ownership of your IP to the newly formed Cyprus company.
• After the company formation, we will help you structure licensing agreements between the Cyprus company and other entities to optimize tax benefits.
• We help you with all agreements that need to be put in place to effectively organize the patent box structure. These agreements will be prepared and drafted by our specialized legal team.
• We will draft a tax opinion and make your case in obtaining a binding tax ruling from the Cyprus Tax Authorities for the tax treatment of your Cyprus Company, ensuring that this is eligible under the IP Box
• As a Cyprus IP owner company which is eligible under the Cyprus IP Box your profit will be subject to a maximum tax rate of 2.5%. Also, any dividends you receive as the owner of this company will be completely exempt from withholding tax at the source.
• Our team will offer you guidance on national, European and international patent applications, protecting your IP worldwide.
• We will help structure effective licensing and franchising arrangements for your IP.
• Address trademark objections, cancellations, and counterfeiting issues.
• You will leverage our search and investigation services to monitor trademarks, patents, and potential infringements.
• We will help you streamline the process of registering and renewing existing or new trademarks and patents.
• You will have a professional valuation of your intellectual property assets.
• You will get comprehensive protection for your valuable intellectual property assets.
• Our team will help you streamline the IP management process and the tax implications.

Ready to start benefiting from low taxes? Schedule a free consultation today.

Schedule your free consultation to learn about Cyprus IP Box

The Cyprus IP box regime offers a unique and attractive opportunity for IP-focused businesses and has the most tax-efficient jurisdictions.

If you are looking to set up an IP or a software company, schedule a FREE 30-minute consultation with our experienced IP lawyers and discover how this regime can benefit your business.

Ready to get started? Get in touch today!